(concurring in part and dissenting in part).
1. I concur in Judge Pickard’s opinion, except I would not apply Montoya v. AKAL Security, Inc., 114 N.M. 354, 838 P.2d 971 (1992), retroactively based on the record in this case.
2. Employer’s efforts to settle this case began in July 1988. Employer negotiated with both of Worker’s first two attorneys before Worker employed present counsel. On September 7, 1990, the parties filed a joint motion to vacate the September 25, 1990, formal hearing. In the motion, the parties stated that the possibility of settlement was “very good” but that they were awaiting resolution of Worker’s third-party claim before final settlement. Employer was aware of the clearly established New Mexico legal precedent holding that the settlement of the third-party claim would eliminate Worker’s claim for compensation. Castro v. Bass, 74 N.M. 254, 392 P.2d 668 (1964). Thus, all Employer’s settlement negotiations were premised upon the assumption that once the third-party tort case was resolved Employer would be entitled to reimbursement for past benefits and would not be liable for any further compensation benefits.
3. During the next several months, Worker’s counsel failed to respond to Employer’s repeated inquiries regarding the status of the third-party suit. At a formal status conference, however, Worker’s counsel indicated settlement of the third-party claim was expected shortly. The workers’ compensation hearing was then rescheduled for February 11,1992.
4. Employer attempted to contact Worker’s counsel in January 1992 and was informed she would be in trial in Texas “for a few months.” After conferring with the attorney who handled calls for Worker’s counsel in her absence, Employer agreed to a second stipulated motion to vacate the formal hearing. Again, the parties mutually represented to the Worker’s Compensation Judge that they were “very close to settlement.” The motion to vacate was granted and the case was rescheduled for formal hearing on April 24,1992.
5. About the time Employer was attempting to get in contact with Worker’s counsel, the third-party claim was being settled. On or about January 10, 1992, Worker settled her third-party claim. At that time, of course, the law remained as it had been for almost thirty years that Worker’s settlement with the third-party tortfeasor would terminate Worker’s claim for compensation and require reimbursement of the Employer. See, e.g., Apodaca v. Formwork Specialists, 110 N.M. 778, 800 P.2d 212 (Ct.App.), cert. denied, 110 N.M. 749, 799 P.2d 1121 (1990).
6. On April 20, 1992, Employer moved to dismiss the Worker’s compensation claim for failure to prosecute. Worker did not respond to Employer’s motion. Employer continued to try to reach Worker’s attorney but received no response. On August 4, 1992, Employer finally filed a Motion for Reimbursement on the basis that Worker had not responded to any of Employer’s requests for information about the third-party claim, and might not be adequately protecting Employer’s right to reimbursement. Formal hearing was scheduled for September 4, 1992.
7. On September 2, 1992, our - Supreme Court filed the Montoya opinion. At the September 4th hearing, Worker for the first time revealed that she had settled her third-party claim. Nor was this a mere coincidence. At the oral argument before this Court, Worker’s counsel revealed she was a friend of the attorney handling the Montoya appeal and knew the Supreme Court had agreed to review that case on certiorari. Counsel admitted it was her hope the Supreme Court would use Montoya to change the law long embodied in Castro and its progeny. Worker’s counsel delayed in informing the Employer of the third-party settlement for nine months, until two days after the Montoya decision was entered.
8. Our Supreme Court has retained the guidelines for retroactive application of a new rule of law set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971). Beavers v. Johnson Controls World Servs., Inc., 118 N.M. 391, 398, 881 P.2d 1376, 1383 (1994). Pursuant to these guidelines, retroactive application of judicial decisions is determined on a case by case basis after examining the following factors: (1) whether the decision establishes a new principle of law; (2) the purpose of the new rule of law and the effect of retrospective application upon that purpose; and (3) how much reliance was placed upon the old rule and the effect retroactive application would have upon the administration of justice. Chevron Oil, 404 U.S. at 106-107, 92 S.Ct. at 355-356. I believe application of these factors precludes the retroactive application of Montoya to the present ease.
9. As to the first factor, there can be no dispute that Montoya overruled Castro which had long been the established law in New Mexico. Montoya, 114 N.M. at 357, 838 P.2d at 974.
10. The second factor is the purpose of the new rule. The purpose of Montoya was to achieve an “equitable allocation of responsibility.” Id. This is a laudable goal, and I agree with Judge Pickard that it is the most likely intent of the original legislation. As this case indicates, however, there is a fair difference of opinion on how Montoya directs an equitable allocation of responsibility be accomplished. In the present case, retroactive application of Montoya does not serve to achieve an equitable allocation of responsibility because it would deprive Employer of a legitimate legal defense upon which it based four years of legal strategy and good faith bargaining. Cf. Lopez v. Maez, 98 N.M. 625, 632, 651 P.2d 1269, 1276 (1982) (“If the new law imposes significant new duties and conditions and takes away previously existing rights, then the law should be applied prospectively.”). The retroactive application of Montoya in this case would also reward Worker for failing to reveal the third-party settlement for almost nine months.
11. That brings me to the third and, on the present facts, most critical of the Chevron factors: reliance on existing law. Employer in this ease justifiably relied on the Castro rule in evaluating and preparing its defense. Had Employer not believed that Worker had elected her remedy its attempts to provide vocational training and job placement would likely have been different. Moreover, if Employer had not relied on existing law, that its liability would be extinguished upon settlement of the third-party claim, Employer would not have relied on Worker’s repeated representations that the third-party settlement was imminent and would not have consistently agreed to continue the various formal hearings in this matter. Therefore, if Employer had been timely provided the information it repeatedly sought on the third-party settlement it could likely have enforced its rights under Castro; before Montoya changed the law.
12. In Beavers, our Supreme Court recognized that different policy issues inform, the analysis of the reliance factor in tort than in contract cases:
The reliance interest to be protected by a holding of nonretroactivity is strongest in commercial settings, in which rules of contract and property law may underlie the negotiations between or among parties to a transaction. Upsetting what may very well be the legitimate expectations of one or more of the parties under the rubric of ‘treating similarly situated parties the same’ may simply be unjustified.
Id. at 399, 881 P.2d at 1384 (citations omitted). An employer’s right to reimbursement is the right to receive back what has been paid to another and creates a conditional debtor-creditor relationship between the employer and the injured worker. Transport Indem. Co. v. Garcia, 89 N.M. 342, 345, 552 P.2d 473, 476 (Ct.App.), cert. denied, 90 N.M. 9, 558 P.2d 621 (1976). The reliance factor is, thus, critically important in this case which involves settlement negotiations conducted in good faith and based in concepts of implied contract. Employer relied upon long-established law and should not be punished because of its reliance on Worker’s consistent representations that the third-party settlement was close and her silence after the event.
13. I would not retroactively apply Montoya to the present facts, but if it is to apply, I agree with Judge Pickard’s interpretation of that case. I do not believe our Supreme Court intended to ignore the language of NMSA 1978, Section 52-5-17 (Repl.Pamp. 1991) in Montoya, and I believe Judge Pickard’s application of Montoya is most faithful to the statutory language.